Highlights  — ADDITIONAL CANDLESTICK SIGNALS, GAPS AND BREAKOUT

This part explains gap types, candle-range patterns, opening-range methods, and breakout/retest terminology. Formula rules are descriptive aids, not guarantees of trading results.

261. Common Gap

Meaning: A common gap is a price gap that appears within an established trading range and is not usually associated with a major breakout.

How it works: It can arise from ordinary order imbalance or low liquidity and is often filled as trading returns to the prior range.

Formula / pattern rule:

Practical example: Example: yesterday's close is ₹100 and today's open is ₹102, giving a simple close-to-open gap of ₹2.

Formula terms explained: Current Open = first traded price of the new session. Previous Close = final traded price of the prior session. Gap size is the difference between them; chartists also inspect whether the candle ranges overlap.

Important caution: Common gaps are usually less meaningful than gaps that break important chart levels. A gap may not fill.

262. Runaway or Measuring Gap

Meaning: A runaway gap, also called a measuring gap, occurs during an established trend and may indicate that the trend is continuing with strength.

How it works: It can reflect renewed participation in the direction of the trend. Volume, trend context and whether price holds beyond the gap help assess it.

Formula / pattern rule:

Practical example: Example: a stock in an established uptrend closes at ₹420 and opens at ₹432; the simple gap size is ₹12.

Formula terms explained: Current Open and Previous Close define the close-to-open difference. 'Runaway' describes a gap within a trend, rather than the first gap out of a base or a late-stage exhaustion gap.

Important caution: A gap alone cannot distinguish a measuring gap from an exhaustion gap in real time; later price behaviour matters.

263. Gap Fill

Meaning: A gap fill occurs when price later returns to the price area left untraded by a gap.

How it works: Traders track whether price revisits the previous session's range. Some gaps fill quickly, while others remain open for a long time or never fully fill during the period studied.

Formula / pattern rule:

Practical example: Example: the previous session's high is ₹200 and the new session's low is ₹205. The gap zone is approximately ₹200–₹205; a full fill would require price to return to ₹200 or below under this definition.

Formula terms explained: Previous High = highest price of the prior candle. Current Low = lowest price of the new candle. Gap-zone definitions vary; close-to-open gaps and candle-range gaps are not identical.

Important caution: Do not assume a gap must fill or trade against a strong trend merely because a gap exists.

264. Island Reversal

Meaning: An island reversal is a group of candles separated from the preceding and following price action by gaps, creating an isolated 'island' on the chart.

How it works: It can mark a sharp sentiment change, particularly after an extended move. The reversal interpretation is stronger when the second gap moves price back in the opposite direction and the new area holds.

Formula / pattern rule:

Practical example: Example: after a prolonged rise, a stock gaps up, trades in a small isolated range, then gaps down below that range. Traders watch whether the breakdown holds.

Formula terms explained: Gap₁ and Gap₂ are the first and second gaps. Isolated range is the group of candles between them. The two gaps generally separate the island from surrounding candles.

Important caution: Island reversals are relatively uncommon and may be hard to identify in continuously traded or highly liquid instruments.

265. Inside Bar Pattern

Meaning: An inside bar is a candle whose high is lower than the previous candle's high and whose low is higher than the previous candle's low.

How it works: It shows a contraction in the current candle's range. Some traders watch for a break above the mother bar's high or below its low as a possible expansion signal.

Formula / pattern rule:

Practical example: Example: mother bar high/low are ₹150/₹140; the next candle high/low are ₹147/₹143, so it is inside the mother bar.

Formula terms explained: Mother bar = the candle containing the inside bar. High = session peak; Low = session trough. Strict definitions generally require both inequalities.

Important caution: An inside bar does not predict the direction of the next move; breakouts can fail.

266. Outside Bar Pattern

Meaning: An outside bar has a high above the previous candle's high and a low below the previous candle's low.

How it works: It shows a wider range and stronger two-sided movement than the prior candle. Direction depends on where the candle opens and closes, its body, and the broader context.

Formula / pattern rule:

Practical example: Example: previous candle high/low are ₹250/₹240; the next candle reaches ₹255 and falls to ₹237, making it an outside bar.

Formula terms explained: High and Low are the candle's extremes. Outside bar means the current range fully contains the previous candle's range.

Important caution: It can be bullish, bearish or indecisive; range expansion alone is not a directional signal.

267. Inside-Bar Breakout

Meaning: An inside-bar breakout occurs when price moves beyond the high or low of the mother bar after an inside bar forms.

How it works: A break above the mother-bar high may be treated as a bullish setup; a break below the mother-bar low may be treated as bearish. Some traders wait for a candle close outside the boundary.

Formula / pattern rule:

Practical example: Example: mother-bar high is ₹325 and low is ₹315. A confirmed close above ₹325 is an upside break; a close below ₹315 is a downside break.

Formula terms explained: Trigger = the price condition used to consider a setup. Mother-bar high/low define the boundaries. 'Confirmed close' means a candle finishes beyond the level, not just briefly crosses it.

Important caution: A brief intrabar cross can reverse before the close. Stops and position size still matter.

268. NR4 Pattern

Meaning: NR4 means 'narrow range four': the current candle has the smallest high-to-low range among the current candle and the previous three candles.

How it works: It signals short-term range contraction. Traders may monitor a break beyond the NR4 candle's high or low for possible expansion.

Formula / pattern rule:

Practical example: Example: the last four ranges are ₹8, ₹6, ₹5 and ₹3. The last candle is NR4 because ₹3 is the smallest.

Formula terms explained: Range = High minus Low. The subscript t means the current candle; t−1, t−2 and t−3 are the previous three candles. min means the smallest value in the set.

Important caution: Range contraction does not determine breakout direction, and low-liquidity candles can distort the signal.

269. NR7 Pattern

Meaning: NR7 means 'narrow range seven': the current candle has the smallest high-to-low range among seven candles, including the current one.

How it works: It is a longer short-term contraction pattern than NR4. Traders often wait for price to break the narrow candle's range.

Formula / pattern rule:

Practical example: Example: if today's range is ₹2 and each of the previous six ranges is larger, today's candle qualifies as NR7.

Formula terms explained: Range_t is the current candle's range; t−1 through t−6 are the six previous candles; min means the smallest range.

Important caution: NR7 identifies compression, not whether the next move will be up or down.

270. Key Reversal Bar

Meaning: A key reversal bar is a candle that makes a new extreme relative to recent price action and then closes strongly in the opposite direction.

How it works: After a decline, a bar that makes a lower low and closes strongly higher may be interpreted as bullish; after an advance, a higher high followed by a weak close may be bearish. Definitions vary among traders.

Formula / pattern rule:

Practical example: Example: after several falling sessions, a stock makes a fresh short-term low but closes above its open and near the day's high.

Formula terms explained: Recent Lows/Highs = extremes from a chosen lookback period. Close near the high/low indicates where price finished within the candle range; no universal numerical threshold exists.

Important caution: Because definitions differ, write down the exact rule before backtesting or trading it.

271. Pin Bar

Meaning: A pin bar is a candle with a relatively long wick on one side and a small real body, suggesting rejection of a price area.

How it works: A long lower wick may indicate rejection of lower prices; a long upper wick may indicate rejection of higher prices. Location and follow-through help determine whether it matters.

Formula / pattern rule:

Practical example: Example: the real body is ₹2 and the longer wick is ₹8, so the wick-to-body ratio is 4:1.

Formula terms explained: Real body = absolute difference between close and open. Wick length = distance from the body edge to the candle's high or low. Some traders require a minimum ratio, but there is no universal threshold.

Important caution: A pin bar is not automatically a reversal signal; a long wick can appear in a strong trend.

272. Bullish Pin Bar

Meaning: A bullish pin bar usually has a long lower wick and a small body nearer the upper end of the candle range.

How it works: It suggests price traded lower but buyers pushed it back upward before the close. It is more relevant near support or after a decline than in the middle of a random range.

Formula / pattern rule:

Practical example: Example: open ₹100, close ₹104 and low ₹96; the lower wick is ₹4.

Formula terms explained: Open and Close define the real body. min(Open, Close) means whichever of the two prices is lower. Low is the candle's lowest traded price.

Important caution: Look for confirmation and nearby support; the candle can fail.

273. Bearish Pin Bar

Meaning: A bearish pin bar usually has a long upper wick and a small body nearer the lower end of the candle range.

How it works: It suggests price traded higher but sellers pushed it back down before the close. It can be relevant near resistance after an advance.

Formula / pattern rule:

Practical example: Example: high ₹118, open ₹110 and close ₹112; the upper wick is ₹6.

Formula terms explained: High is the candle's highest price. max(Open, Close) means whichever of the open or close is higher; subtracting it from High gives the upper wick length.

Important caution: A bearish pin bar is not enough on its own to justify a short trade.

274. Inside Bar with Trend

Meaning: This setup uses an inside bar as a pause within an existing trend rather than as a reversal pattern.

How it works: In an uptrend, a break above the mother-bar high may be watched as continuation; in a downtrend, a break below the mother-bar low may be watched. The trend definition should be objective.

Formula / pattern rule:

Practical example: Example: price is above a rising 50-period EMA, forms an inside bar, then closes above the mother-bar high.

Formula terms explained: EMA₅₀ = the 50-period exponential moving average, which gives more weight to recent prices. Close > EMA₅₀ is a simple trend filter, not a complete definition of an uptrend.

Important caution: Trend filters lag and can misclassify sideways markets.

275. Opening Range Breakout (ORB)

Meaning: Opening Range Breakout uses the high and low established during a defined early-session window, then monitors for a move outside that range.

How it works: For Indian equities, traders may define the first 5, 15 or 30 minutes after the NSE session opens. A break above the opening range high is a possible bullish trigger; a break below the low is a possible bearish trigger.

Formula / pattern rule:

Practical example: Example: during the first 15 minutes, the high is ₹512 and low is ₹504. Those become the ORB boundaries for the chosen method.

Formula terms explained: Highᵢ and Lowᵢ are the highs and lows of candles inside the opening window; max selects the highest high and min the lowest low.

Important caution: Opening volatility can produce false breaks. Include liquidity, broad-market context and a predefined risk limit.

276. Opening Gap Strategy

Meaning: An opening-gap approach classifies the gap relative to the previous session and applies predefined rules for continuation, rejection or a possible gap fill.

How it works: The strategy must define whether the gap is measured close-to-open or by non-overlapping candle ranges, and what confirms a trade.

Formula / pattern rule:

Practical example: Example: previous close ₹500 and current open ₹510 gives a 2% positive close-to-open gap.

Formula terms explained: Openₜ = current session open; Closeₜ₋₁ = previous session close; the denominator normalizes the difference by the prior close so gaps can be compared across price levels.

Important caution: A gap's direction does not guarantee continuation; define the entry, invalidation and time window before testing.

277. Breakout Retest

Meaning: A breakout retest occurs when price breaks a support/resistance boundary and later returns to test that level from the other side.

How it works: Old resistance may act as support after an upside breakout; old support may act as resistance after a downside breakdown. A hold or rejection during the retest may provide additional evidence.

Formula / pattern rule:

Practical example: Example: a stock closes above ₹300 resistance, pulls back toward ₹300, and then turns higher without losing the level.

Formula terms explained: Retest = a return to a previously broken level. Holds as support/resistance means price reacts in the expected way; this is a price-action description rather than a fixed equation.

Important caution: Not every breakout retests, and a retest can fail. Avoid assuming the level must hold.

278. Failed Breakout

Meaning: A failed breakout occurs when price moves beyond a watched resistance or support level but quickly returns inside the prior range.

How it works: It can trap traders who entered in the breakout direction. A close back inside the range, especially followed by movement toward the opposite side, may confirm failure.

Formula / pattern rule:

Practical example: Example: price briefly trades above ₹450 resistance but closes back at ₹446, inside the old range.

Formula terms explained: Resistance is the upper boundary; support is the lower boundary. A close back inside means the candle ends within the prior range after an attempted break.

Important caution: Some failures are temporary; use context and risk limits rather than automatically reversing position.

279. Throwback

Meaning: A throwback is a pullback toward a resistance level after price breaks upward through it.

How it works: If the former resistance holds as support, it may suggest that buyers are defending the breakout area. Some trading literature uses 'throwback' more broadly, so specify the definition used.

Formula / pattern rule:

Practical example: Example: a stock breaks above ₹220 and later returns near ₹220, where buying interest appears.

Formula terms explained: Former resistance = the level that previously capped advances. New support = the same zone acting as a floor after the breakout. The arrow means 'changes role to'.

Important caution: A throwback may not happen; if price falls decisively below the level, the breakout may be failing.

280. Pullback vs. Throwback

Meaning: A pullback is a temporary move against the prevailing trend; in common chart terminology, throwback often refers specifically to a return to a breakout level after an upside breakout.

How it works: Traders distinguish the terms to describe context, but usage varies. A pullback can occur without a breakout, whereas a throwback is generally tied to a breakout retest.

Formula / pattern rule:

Practical example: Example: during an uptrend, price declines for two sessions but stays above trend support (pullback). If price first breaks above ₹500 resistance and then returns to test ₹500, that is commonly called a throwback.

Formula terms explained: Countertrend = movement opposite the main trend. Retest = price returns to a previously broken level. These are descriptive terms, so context and consistent definitions matter.

Important caution: Neither term by itself is a buy or sell signal; evaluate trend, confirmation and risk.

How to Apply These Concepts Carefully

• Define each pattern precisely before backtesting; charting platforms and trading books may use slightly different rules.
• Use candle closes and volume where appropriate; a brief intraday crossing can reverse before the candle finishes.
• Check the broader trend, nearby support/resistance, liquidity, transaction costs and slippage.
• Set the invalidation point and position size before entering a trade.
• Educational reference only; patterns and gap behaviours are probabilistic, not guarantees or personalized investment advice.

 Summary

Entries 261–280 cover common/runaway gaps, gap fills, island reversals, inside/outside bars, NR4/NR7, key reversal bars, pin bars, inside-bar continuation, opening range breakout, opening gap strategies, breakout retests, failed breakouts, throwbacks, and pullback-versus-throwback terminology.